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How To Calculate Net Asset Value

The acronym NAV stands for Net Asset Value. It denotes the per-share market value of a specific mutual fund. The calculation involves subtracting the liabilities from the total value of assets and then dividing the result by the number of shares. To establish the price of each fund unit, one must calculate the market value of a portfolio and then divide it by the total number of current fund units.

How To Calculate Net Asset Value

Typically, the initial unit cost of mutual funds is Rs. 10, and it rises as the assets under the funds increase. According to this principle, the net asset value (NAV) of a mutual fund increases as its popularity increases. The net value of an asset is mostly utilized in the context of open-end funds. These investments do not involve the trading of interest and shares among shareholders.

Net Asset Value (NAV) assists in the decision-making process of selecting investments to remove or retain in an investment portfolio by offering a benchmark value. Now that you are familiar with the concept of NAV in mutual funds let's go into its calculation.

Formula For Net Asset Value

Net Asset Value = (Total Value of Assets) - (Total Value of Liability)


  • The total value of the securities in the portfolio is the value of the assets.
  • Where the following applies: the value of all the securities in the portfolio is the value of the liabilities, and the value of all fund expenses (e.g., staff wages, management costs, operating costs, audit fees, etc.) is the value of all liabilities.

Usually, When the NAV is shown as a percentage of each share. The formula in this scenario would be:

How To Calculate Net Asset Value


The net asset value of a single share should be determined by an investing firm that oversees a mutual fund. Information about the mutual fund is provided to the investment firm as follows:

Example: Based on end-of-day closing prices, the securities in the portfolio are valued at $81 million. There is a total of $20 million in cash and Cash equivalents. Accrued Income for the day is $14 Million. There are $22 million in long-term liabilities, $2 million in short-term liabilities, $5,000 in accrued expenses for the day, and $20 million in shares outstanding.

Using the above Formula:

How To Calculate Net Asset Value

Net Asset Value = $4.03 Million

When is NAV Calculated?

The NAV of mutual funds is released every day. Mutual funds announce their NAV at the end of the trading day, following the closing of the market, in contrast to stocks, which are subject to changes in the market and are updated minute by minute. Moreover, the closing market value of the securities held in the scheme is the basis for the disclosure and prospective assignment of the plan's NAVs. All schemes are required to follow a cut-off schedule under the SEBI Mutual Fund regulations in order to publish their NAVs according to the kind of transaction.

Uses of Net Asset Value

One important metric that investors use to assess the success of mutual funds is net asset value. NAV is utilized in a number of ways in investment management, such as:

  1. Evaluating The Fund's Performance: The net asset value (NAV) is a trustworthy indicator of a mutual fund's success. Investors are able to ascertain whether a fund is producing positive or negative returns by examining the NAV of the fund over time. In order to gauge the success of a mutual fund, one of the first steps is to compute its net asset value.
  2. Purchasing and Selling Shares: The NAV is the price at which mutual fund shares are purchased and sold by investors. NAV is a useful tool for investors to assess the worth of their holdings and make wise selections.
  3. Fund Management: Mutual fund businesses employ net asset value (NAV) to manage the portfolio of their funds. Utilizing the NAV, one can calculate the expenditure ratio of the fund as well as the value of its assets and liabilities.

Key Takeaways

  1. The value of a fund's assets, less any liabilities and costs, is known as its net asset value.
  2. On a per-share basis, the NAV denotes the price at which fund units can be purchased or sold by investors.
  3. The NAV rises in tandem with an increase in the fund's securities' value.
  4. The NAV declines in response to a decline in the value of the fund's securities.
  5. It is impossible to determine how "good" or "bad" a fund is based solely on its NAV number.
  6. When evaluating a fund, it is best to examine its NAV over an extended period.

Role of Net Asset Value in the Performance of a Fund

A common misconception among investors is that an asset's stock price and net worth are the same. Therefore, they tend to believe that funds with a smaller net asset value are more affordable and, as a result, superior investments. The computation of net asset value, however, is unrelated to the fund's performance. An investment is only complete if a fund has a smaller net worth.

An asset's net value only shows you how the underlying assets have done over the past few years. Consequently, while selecting funds to invest in, investors should use something other than it as a determining factor. To make an educated choice, they ought to review the returns on their investments.

How To Calculate Net Asset Value

Knowing a fund's net value is helpful for comprehending its daily operations. However, it needs to tell you how profitable a fund is. Thus, prior to investing, investors ought to review the funds' past performance and current cost of capital.

Relationship Between NAV and Mutual Fund

To create a fund, a sizable portion of investors' capital is combined. Utilizing the funds raised, investments are made in a variety of equities and other financial instruments. A specific number of fund shares are awarded to each investor based on their investment amount. These shares can be sold or redeemed at a later date, and the investor retains the profit or loss.

After the fund is first launched, frequent buying and selling, or investing and redeeming, must start, and this requires putting in place a method for pricing the shares. This pricing method is based on Net Asset Value. Consequently, changes in the fund's NAVPS also affect the price of a mutual fund.

The price of mutual funds does not change with every second that goes by, unlike stocks. Mutual funds are valued according to their assets and liabilities, which is the end-of-the-day approach. The assets of a mutual fund include investments, cash and cash equivalents, receivables, and accrued income.

The closing prices of the securities in the fund's portfolio are used to compute its market value daily. All of a fund's liquid and cash assets are recorded in the cash and cash equivalents section of the balance sheet.

The terms "accrued income" and "receivables" in a fund's financial statements signify money that has been earned but not yet received. Together with any of their qualifying counterparts, these products make up the whole amount of the fund's assets.

Liabilities associated with mutual funds include accounts receivable from lending institutions, unpaid bills, and fees to other affiliated businesses. For instance, foreign liabilities can include shares held by non-resident shareholders, unremitted sale proceeds, and unpaid income or dividends. Depending on how long it takes to make the payments, these outflows can be separated into long-term and short-term obligations.

Liabilities linked with a fund also include accruing costs, which include labor pay, electricity bills, operating expenses, administration fees, distribution costs, marketing costs, transfer agent fees, custodial fees, and other fees related to the fund's functioning. Mutual fund NAV is calculated by factoring in the value of assets and liabilities for a full business day.


In conclusion, both financial professionals and investors need to know how to compute Net Asset Value (NAV). The net asset value (NAV) is a critical measure used to analyze the performance of investment funds, including exchange-traded funds (ETFs) and mutual funds, as well as the worth of individual investments held inside the funds. Investors can obtain the net asset value (NAV) per share by deducting liabilities from assets and dividing the result by the total number of outstanding shares. This gives them an understanding of the underlying worth of their investments. Moreover, NAV computation supports risk management, transparent financial markets, and well-informed investment choices. Therefore, being able to calculate NAV gives people the ability to more confidently and clearly navigate the complex world of investing.

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